Nataļja Puriņa, tax expert at the TEGOS Latvian office, assisted the client to achieve a positive outcome in the dispute with the SRS regarding the application of the 0% VAT rate to a transaction with a Lithuanian company.
The Director-General of the State Revenue Service has completely cancelled the tax control invoice in the amount of EUR 17,062.50 for VAT and EUR 2 619.09 for late payments, acknowledging that the company was wrongly accused of participation in the VAT reduction scheme.
Initial position of the SRS
The SRS believed that there were grounds for an unfavourable tax invoice. Most of the arguments related to the initial purchase of the product, which was not of significant importance in the case. While the most important question – whether the client knew about a fictitious transaction – remained at a declarative level. Conclusions about this were based only on the fact that the business partner was unreachable and did not declare the transaction.
Decision and justification of the Director-General of the SRS
At the same time, after re-evaluating the case on the merits, the Director-General of the SRS concluded that the invoice was applied to the company unreasonably, and there was no objective evidence in the case that would prove the client’s involvement in any kind of tax avoidance schemes or deliberate participation in fraudulent activities:
- there was no objective evidence that the company knew or should have known about any form of fraud,
- the actual course of the transaction was confirmed by payments, transport documents and video recording,
- discrepancies in the dates of documents or delivery addresses could not be considered as grounds for the abolition of the 0% VAT rate,
- the initial conclusions of the SRS were based mostly on assumptions rather than evidence.
“This decision confirms that tax control is a dialogue in which professionally prepared facts, documents and consistent reasoning are paramount. The client’s rights are protected, and the SRS has acknowledged that the collection of additional taxes was not justified,” emphasises Nataļja.
